Laith Khalaf, head of investment analysis at AJ Bell, explains how investors can reduce their exposure to tax on dividend payments as allowance shrinks away to £500
Cuts to the dividend allowance mean the number of people facing tax on their dividends is soaring. HMRC forecast just under 3.6 million people will pay tax on their dividends this tax year, almost double the number who paid three years ago.
These aren’t simply fat cats or company bosses. Lots of small shareholders and basic rate taxpayers are being drawn into the tax net too.
But despite cuts to allowances to a mere £500, paying tax on dividends can be avoided by many of those whom HMRC is expecting to cough up.
Here are some tips to beat the dividend tax trap, though not all will be appropriate for every investor and investors should be particularly careful they don’t start letting the tax tail wag the investment dog.
